AAP dampens foreign supermarkets’ Delhi hopes

A change of guard has had its immediate impact on the economy of the city state, with the newly elected Aam Aadmi Party government reneging on the Congress-led government's promise to toe the centre's line and allow foreign supermarkets to set up shop in the capital.

While Congress-ruled states had by and large agreed to implement the policy of opening up the retail sector for foreign investment, Delhi has become the first to change its mind, a blow to UPA government's efforts to project a liberal image in order to attract overseas investment and revive the economy.

Chief minister Arvind Kejriwal said the decision was taken to address the huge problem of unemployment in Delhi.

He said his government was not per say against FDI, but that his government was only being prudent in the choice of sectors where FDI should be welcome.

Also, he said, global experience had shown that retail FDI caused job losses and that Delhi was not prepared for such job losses.

FDI ''ought to be decided on sector to sector basis,'' Kejriwal said.

The central government, however, said the Delhi government could not reverse this decision just like that.

''My first reaction is that states cannot just walk in or out of this commitment. Those which had accepted they will allow FDI under multi-brand retail had signed a legal agreement with us, based on which we had issued the notification,'' reports quoted commerce minister Anand Sharma as saying.

Kejriwal said withdrawing FDI from multi-brand retail was part of the AAP manifesto. ''Whatever information is available shows if there is FDI in retail, it improves consumer choices, however, experience worldwide shows that it leads to loss of jobs worldwide also,'' Kejriwal said.

''The data of the centre is not corroborated by the experience worldwide. Unemployment is a huge issue in Delhi presently and it came down to being a decision between addressing unemployment issues in the city and providing consumers with choices, and I chose the former,'' Kejriwal said.

He dded, ''There is no conducive environment provided to the retail sector to start business. This sector faces so much corruption in every stage. In the next few days, I will hold a meeting with people from industries and traders to ask what kind of bottlenecks are faced by them and what can be done to generate wealth. We are committed to creating an honest environment which is corruption-free and the anti-corruption helpline is a move towards this. With the proper environment expansion of retail trade is possible,'' he said.

The letter from the commissioner of industries Amit Yadav to the DIPP secretary said, ''The government of NCT of Delhi had extended its support to the government of India's decision for liberalisation of foreign direct investment policy in multi-brand retail trade with certain suggestions. In this connection, I am directed to inform that government of NCT of Delhi has reviewed its earlier decision and it has been decided not to support foreign direct investment policy in multi-brand retail trade…In view of the above, the letter from government of NCT of Delhi may be treated as withdrawn.''

Last year, the central government permitted 51 per cent FDI in multi-brand retail trading but left its implementation to the states. While Congress-ruled states had agreed to implement the policy, non-Congress governments in states have opposed the policy.

Although the country's estimated $500-billion retail industry offers a huge opportunity to foreign supermarkets, investors are bargaining for more policy relaxations and greater freedom of operation in order to make the most of such opportunity.

Wal-Mart Stores Inc, the world's largest supermarket chain, has delayed its India rollout plans after ending an alliance with Bharti Enterprises  (See: Walmart ends alliance with Bharti; to go slow with wholesale business)

as the retailer failed to extract more concessions from the government (Walmart still lobbying in US on Indian retail issues: report). The company, however, was accused of being involved in illegal investments in retail operations even before the government announced its FDI policy in retail trade.

However, Britain's Tesco has now taken the plunge, announcing it would buy a 50-per cent stake in Trent Hypermarket Ltd, which is part of the Tata group (FIPB clears Tesco's $110-mn investment in multi-brand retail JV with Tatas).

The centre pushed through the policy allowing 51 per cent FDI in the teeth of fierce opposition from domestic retailers and opposition parties, who said it would cause mass job losses and render millions of small family run shops out of operation.

Only 11 out of India's 28 states have agreed to roll out the policy. Most of these are states are ruled by Congress party governments.